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Airline Management

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SUMMARY: Is it too Early to Bury the A380 ? Then a look at the costly $25.0B, A380-800 program in more detail which has just 317 orders and 210 deliveries for the $436.9M List Price airliner now operated by 13 airlines. As we approach 10 years in service with Singapore Airlines we will see the first used A380’s to come to the used market (for airline and possibly VVIP/Head of State use). Does the big 4 engine airliner have a future ? a niche ? as it is the lowest cost per unit (CASK) airliner in the world at Emirates, where some are configured with 615 seats, and its why Malaysian Airlines is putting in 700 seats on its A380’s for Hajj and other charters, wile ANA will have 600+ seats in its 3 x A380s for its high demand leisure flights from Japan to Hawaii, replacing 2 x B767-300’s flights with one A380 flight, a sign of some new potential for the “Queen” of the skies ? Lets hope so.

https://www.aerotime.aero/en/civil/18805-is-it-too-early-to-bury-the-a380 ————————————————————————————————————————————————————————————— With permission from Aerotime Is it too early to bury the A380? Published on: May, 19, 2017 Source and image:Oleg Volkov Airbus A380 is big, beautiful, and notoriously problematic when it comes to airport availability and – most importantly – profitability. For some, like Emirates, it is still a signature aircraft that is … Continue reading

SUMMARY: The General Aviation turboprop deliveries are out for 1st Quarter, 2017 and deliveries are down to 99 aircraft and $273.M in revenue, from 109 deliveries in 1Q/2016 (-9.1%). The decline is due to the large drop in the Twin Turboprop Pressurized Segment, which had only 12 deliveries of King Airs (and NO Piaggio Avanti Evo) versus 27 deliveries (inc. 1 x Piaggio Avanti Evo) in 2016, a drop of 55%, what is happening to the King Air demand or the “walking dead” Piaggio Avanti EVO ? The Agricultural Turboprop Segment did the best with 46 deliveries up from 38 in 2016 (+27.7%) with revenues of $54.1M. The Single Engine Pressurized Segment was stagnant at 23 deliveries as in 2016, with Pilatus delivering 4 less (-25%) PC-12NG’s than in 2016, and total revenue of $98.7M (+26% more than the twin market). The Single Engine Utility market was down to 18 deliveries and had revenue of $42.1M on the back of 4 (-33%) fewer Caravan deliveries, but Quest’s Kodiak was up to 9 deliveries (+80%) over 2016 delivery of 4 aircraft. The big “loser” this past Quarter is Textron Aviation with 12 King Air deliveries down from 26 and then the Caravan with deliveries down to 8 from 12 last year, so what’s up at Textron ? as 16 less turboprops were delivered versus 2016. The “winners” are Quest Aircraft’s Kodiak with 9 deliveries up from 5 last year, and the Air Tractor with 36 deliveries up from 28, a good start for most, but Textron ?

  READ MORE ON THE TURBOPROP MARKET, JUST CLICK ON GENERAL AVIATION   The First Quarter, 2017 General Aviation turboprop deliveries are out from GAMA, and total aircraft unit deliveries are down (-9.1%) to 99 from 109 in 1st Quarter, 2016 and total revenue was $273.2M ($2.75M per average aircraft delivered). ————————————————————————————————————————————————————————————— The Agricultural Aircraft … Continue reading

SUMMARY: A small airline in Thunder Bay, Ontario, North Star Air Ltd. has been bought for $C 31M ($US 23M) by Winnipeg based North West Company (NWC), a large Canadian grocery and retail company with +218 stores, many in remote and isolated communities across Canada’s North. The driver of this deal was to control its distribution by having its own cargo airline, and not being dependent on what is basically a air cargo monopoly by Calm Air in the Manitoba, Nunavut and Kivalliq regions, where NWC has many stores, and where the First Nations communities are totally dependent on aircraft for all their local needs for most of the year. The acquisition raises the problem of a lack of competition in many parts of the North, where communities and suppliers have all but one choice of airline in and out of many communities, which in many cases allows for high margin “monopoly” pricing. Canada has no Essential Air Service (EAS) like the USA, which subsidizes scheduled air services to 150 markets of which 44 are in remote parts of Alaska with single engine turboprops like the CE-208B to SF340’s and CRJ-200’s at a cost of $250M a year (President Trump looking to cut that). Canadian passengers and suppliers in the North have no choice but to pay the very high fares and freight rates demanded by air operators. Time for a new fresh look at affordable air access in the North ? if we are to develop the North as Ottawa says, then we cannot burden and punish the people there with high fares and freight rates, that make life their very expensive as everything in most communities goes by air, from groceries, lumber to even fuel for electric generators.

It has been pretty quite on the Canadian airline mergers and acquisition front since the late June, 2016 acquisition of Transwest Airlines (Prince Albert, Saskatchewan) by local rival West Wind Aviation (Saskatoon, Saskatchewan). That deal created another Provincial regional airline monopoly, just as EIC (Exchange Income Corporation) has in neighboring Manitoba, where it now owns … Continue reading

SUMMARY: The Chinese COMAC C919 airliner made its first flight today (May 5, 2017), and hopefully it will not be long before it is delivered to its first customer, China Eastern. The Comac ARJ-21-700 regional jet (evolved from the locally built MD-82’s and MD-90-30’s programs) took an incredibly long 2,769 days (93.3 months or 7.6 years) from its first flight to delivery to its first customer. This C919, is NO ARJ-21, this is an aircraft China can be proud of and one that can and will compete with Airbus, Boeing, Irkut and Bombardier when it gets its EASA Type Certificate which will take time, as the shadow certification of the ARJ-21 with the FAA did not materialize. Yes, there will be many issues with very poor sales & marketing, product support and after sales service, something Comac has no experience with and AVIC is horrible at. The ARJ-21 has no FAA certification and most likely never will, and will be relegated to flying for Chinese airlines and the very few “dubious” nations that do not require EASA or FAA certification for local registration and operations. The C919 has 99 orders, 227 options and 566 “commitments” so well over its stated break-even of 400 units. A proud day indeed, given the fiasco with the ARJ-21, now Comac will work with EASA to shadow certify the C919, but that will take a few years for sure, so no immediate concerns for the other 4 competing OEM’s. Lastly, this C919 is not the first Chinese indigenous jet airliner, back in 1970 the Chinese then under Chairman Mao Zedung, developed the Shanghai Y-10, a close similarity to the Boeing B720/B707, but it started way before President Richard Nixon’s famous trip to China in 1972 with Air Force One, a C-137 Stratoliner, a modified long range Boeing B707, referred to as SAM26000 (special air mission), in service from 1962 to 1999.

With the Comac C919 making its first flight, China finally has a commercial aircraft it can be proud off, and this aircraft will be able to compete with the Airbus A320neo, Bombardier’s CS300, Irkut MC-21, Boeing B737-7 and, B737-8 in time as it will require years to get its EASA certification, but Chinese airlines who … Continue reading

SUMMARY: Beautiful, high technology aircraft are great, but do NOT guarantee commercial success, in the end its about meeting customers’ needs rather than on selling a ‘product’, and here lies the problem with Bombardier’s CSeries sales. The company came out with its so-called “game changer” in July, 2008 (yes 9 years ago and yet only 320 orders today), with claims it is 20% more fuel efficient and has 15% lower cash operating costs than currently produced aircraft with a fantasy forecast that 7,000 aircraft over 20 years will be delivered in the 100 to 150 passenger segment ? and it all sounded like they had a “winner”. BUT with low fuel prices and interest rates and airlines up-gauging from smaller 100-150 passenger airliners, the CSeries ‘benefits’ have fallen on deaf ears with airline executives, unless a huge +65% discount is offered to make the deal (e.g. LH, DL, AC, etc.), yet the only CSeries deal done in the past 12 months since the hugely discounted 75 x CS100 deal with Delta Air Lines (Loss to Bombardier of $+/-525M), has been 2 x CS300’s to little known Air Tanzania ? Meanwhile Airbus has accumulated 5,056 orders for its A320neo line and Boeing’s Max line has 3,703 orders. Is there a lesson here for OEM’s ? Off course, “don’t count your chickens before they hatch”.

Check out previous Articles on Bombardier, Commercial Aircraft, Low Cost Airlines, General Aviation, Regional Airlines to Airline Management and Mergers and Acquisitions https://www.linkedin.com/in/tomas-chlumecky-3200a021/recent-activity/posts/   We forget that high tech fantastic aircraft do not add up to commercial success (PHOTOS BELOW: Concorde (Mach 2+ airliner), Canada’s Avro C-102 Jetliner (2nd jet airliner to fly after the … Continue reading

SUMMARY: Canada’s WestJet Airlines, is planning to start a new ultra low cost carrier (ULCC) later this year with 10 x B737-800’s. This will be the first time that a low cost carrier (LCC) that re-positioned itself into a hybrid airline, goes back and starts a ULCC and goes after a market segment they abandoned years before. This is so badly needed in Canada where the top two airlines have a duopoly and control 85% of the domestic capacity, and till today there is NO real low cost carrier (LCC) in Canada, the only major developing country in the world not to have one. In fact, NO US based low cost carrier competes in the Canadian market (yet), and its why +5 million Canadian passengers drive across the US border every year to fly from US airports to save on air travel, by using lower cost US airlines. A ridiculous passenger spillage that no one seems to care about, while the only low cost airline right now coming into Canada is Iceland’s fast growing WOW Air with very low priced deals to Iceland and Europe. The ultra low cost model is growing and even now the US big 3 airlines (DL, UA and AA) are experimenting with their new “Basic Economy” pricing, no amenities, everything ‘extra’ approach, good idea or a dilution of their brands ?

So WestJet Airlines, once Canada’s LCC is starting all over again with another LCC airline of its own ? is this to counter the growing competion from Air Canada’s “LCC” rouge, and the new Canadian planned start-ups like Canada Jetlines, Fly Too (Enerjet with Indigo partners) and NewLeaf now that foreign ownership of a Canadian … Continue reading

SUMMARY: The 2016 General Aviation turboprop deliveries and sales numbers are out from GAMA, and the turboprops were the only segment to record an increase in deliveries (+3.4%), as piston (-4.9%) and especially business jets (-7.9%) are down on 2015 numbers. With 576 turboprop aircraft delivered (and 675 engines, all PT6’s except 10 GE H80 engines) with a sales value of $US 2.057 billion (+8.6%), 2016 was a good year for 3 of the 4 segments (Agricultural, Single engine utility, Single engine pressurized) with Twin turboprop deliveries slightly down (-9.1%). In terms of units, the best segment was the Single engine pressurized with 179 deliveries led by Pilatus with 91 deliveries of its PC-12NG, but new competition is coming soon from Textron’s Denali and EPIC 1000. By sales, the best segment was the Twin Turboprop market, which is dominated by Textron’s King Air (C90/250/350) line with $793 million in sales. While not in GAMA figures, the 5 OEM’s still in the 19 passenger turboprop market, delivered +/- 35 aircraft worth $US 255 million. Lastly, the Agricultural aircraft market is still doing well, with 151 deliveries worth $198 million from crop spraying, fire fighting to actual counter insurgency (COIN) fighting, showing how versatile the turboprops really are today and why we see GE now challenging the P&W PT6 domination of the market for over 50 years.

READ: 2015 GA turboprop results, February 17, 2016 blog. https://www.linkedin.com/in/tomas-chlumecky-3200a021/recent-activity/ Another year has passed and time to do my annual turboprop review. The 2016 GAMA shipment and billing numbers were not good for the industry, with overall billings down from $US 24.1 billion in 2015 to $US 20.7 billion, down 14.1% while unit deliveries were … Continue reading

SUMMARY: Bombardier is looking into upgrading its CRJ line, which after +1,864 deliveries is now down to around +/-58 orders at best in backlog or 14 months of current production (April, 2018). The sad reality is that the CRJ is no longer very competitive against the current Embraer E175 and the new E175/190-E2’s will make the CRJ obsolete. After having upgraded the CRJ cabins in 2016, now the focus is on possible new engine (unknown at this time), but that is an expensive upgrade versus the current GE CF34 engines, and adds weight, which for a long fuselage aircraft like the 119 foot long CRJ-900, with rear mounted engines is not good for C of G issues. With only 19 CRJ orders in 2016, Bombardier has been milking and living off its backlog, but is there any life for the CRJ really ? even after +/-30% discounts off list price, sales are not impressive anymore. The CRJ is a 1970’s Canadair CL-600 Challenger (the Type Certificate for all CRJ’s), stretched 4 times with a tight cabin width of just 8 feet and 5 inches (2.69 meters) that has been become a 50 then 70 then 85 and finally 104 passenger airliner, while Embraer designed and built the EJets from scratch, and that is now paying off got Embraer and blowing up in Bombardier’s face. At a time when the CSeries is still struggling for orders, Bombardier Aerospace needs all of its products to sell and sell, yet the Learjets, Challenger 650, Global G5000/6000, Q400 and CRJ are sadly in the final decline phase of their product life cycle as new competing products are coming online across all segments..

Follow up to the January 4, 2017 Blog “Lots of Talk about Bombardier’s turnaround”   Bombardier is now looking for solutions to keep its CRJ line open for a couple of years as the backlog now dwindles to 14 months at current production rate of 4.2 per month and current order book. Now paying for … Continue reading

Surinam Airways must ‘think Big’, with a Big vision for the future beyond just Suriname, too many small national carriers think ‘small’ and never achieve their full potential, sticking to old tried ways without much success, yet look at the success of COPA (Panama), Norway Air Shuttle (Norway), Ethiopian Airlines (Ethiopia), Ryanair (Ireland) to Singapore Airlines (Singapore), think Big, plan Big, act Big and do Big things and you become Big in time, step by step. But if you think small, plan small, act small you will always remain small and insignificant and most likely, not profitable.

Surinam Airways must ‘think big’, says aviation expert Published on January 23, 2017 by Caribbean News Now by Ray Chickrie Email To Friend    Print Version  By Ray Chickrie PARAMARIBO, Suriname — In his assessment of Surinam Airways (SLM) (3 x B737-300’s and 1 x A340-300), aviation expert Tomas Chlumecky has called on the airline to “get out … Continue reading

SUMMARY: Lots of talk about Bombardier’s Turnaround, 14,500 layoff announcements this year, or 21,450 in the past 3 years. The Global G7000 flew for the first time and Bombardier expects big things from it to boost Bombardier’s bottom line along with the struggling CSeries, which today still has only 320 orders (NO 40 x CS300’s for Republic Airways, just PR not wanting to reduce the meager order book) and still +/- 86 “questionable” orders (representing 26% of the current 320 orders). Lots of effort in reducing labor costs, yet no one is noticing that the top line (revenue) at Aerospace is a coming disaster, and unsustainable with an old product line (1970’s Learjets and Canadair CL-600/Challenger 650, plus the Global G5000/6000) that is facing new and better competition. The CRJ line has no more than 48 orders in backlog, only 18 orders this year (50% from Canada) good for 12 months of production (February, 2018) with no new orders. The Q400 is down to around 34 orders in backlog and only 25 orders this year (50% also from Canada), good for 14 months (March, 2018) with no new orders. The 2020 Turnaround Plan calls for Aerospace to generate $15 billion in revenue (60% of total revenue planned of $25 billion), with just 2 products ? The Plan requires $5 billion from Commercial aircraft, which by 2020 means only the CSeries (CS100/CS300) is left, and that will require at least 140 deliveries at the current highly competitive low prices to hit the “target”, really ? (2020 production is planned at 90-120 aircraft today). Meanwhile, Business jets are to generate $10 billion by 2020, and that will fall on the $75 million Global G7000 (NO Learjets, Challenger 650 and Global G5000/6000’s by 2020) and that means 133+ G7000 deliveries to hit their “target” ? seriously ? has anyone looked at single aisle ACJ and BBJ sales for the past 15 years ? (+/- 15 a year at best). Canada is providing “state aid” (aka taxpayers money) to Bombardier again ($2.5 billion in 2016 from Quebec), in fact of the $3.39 billion of cash on hand as of Sept 30, 2016, $2.5 billion (71% of cash on hand) came from the Government of Quebec, soon another $1.0 billion will most likely come from Ottawa (PM is from Quebec, and they always “help” Bombardier), and then Quebec and Ottawa will be 66.7% owners of the CSeries program (CSALP – CSeries Aircraft Limited Partnership, a separate company, spun off from Bombardier ??). How did we the Canadian taxpayers become “owners” again of a commercial aircraft program that NO commercial aircraft OEM wanted in 2015 when it was for sale for “a song” ? Especially after we the Canadian taxpayers “SOLD” Bombardier, our government owned Canadair in 1986 (for $120 million) and government owned de Havilland in 1992 (for $100 million) with the rights to the Challenger business jet, later stretched into the CRJ line, and the DHC-8 turboprop airliner later stretched into the DHC-8-Q400 line. Meanwhile, Embraer is going to the WTO again to complain about Bombardier’s “illegal state aid”, while Boeing may go to President-elect Donald Trump and get import tariffs applied on the CSeries and then ? Oh, it is going to be an interesting 2017 for sure, stay tuned to the never ending Bombardier/Quebec/Ottawa “gong show”, as they find new ways to screw Canadian taxpayers to keep Bombardier alive at any cost.

Bombardier has now delivered its first CS100 to Swiss and CS300 to airBaltic and talks confidently of a turnaround next year and a bright future in 2020 as per its 5 year Transformation Plan, that should see company become a $US 25 billion a year company by the end of 2020, with Aerospace to provide … Continue reading

UPDATE: Hold on to your wallets Canada ! Bombardier is seeking more money again for a another new aerospace project ! with the so-called “game changer” CSeries an absolute sales disaster with only 318 orders after +8 years of sales ? and right after announcing its 6th wave of layoffs (another 7,500 are to go by 2018) since January, 2014 (34 months ago) for a total of 21,450 jobs gone ! Meanwhile Bombardier’s CEO admits company nearly went bankrupt in 2015, and it now has $3.4 billion in cash, $2.5 billion (74%) came from the Government of Quebec this year (aka bailout money), without Quebec they would have only $900 million in cash today and be close to bankruptcy. Embraer and Boeing are taking the “illegal state aid” case to the WTO. With President-elect Trump coming in, he’s ready to “defend” US corporations from illegal and unfair state aid backed competitors, and don’t be surprised if he tears up NAFTA and hits the CSeries with new tariffs, a perfect scenario for his PR. Everything in decline at Bombardier Aerospace today, the CSeries has only 318 orders (of which 2 have been delivered), what happened to the existing Commercial Aircraft Market Forecast that claims 7,000 deliveries over 20 years (350 per year) ? all BS, in fact Ascend Consultancy forecasts only 1,340 CSeries deliveries over 20 years (67 per year), down 81% on Bombardier’s “fantasy” forecast. No one has noticed, but with only 34 x Q400 orders in backlog and only 60 CRJ’s in backlog, both programs will run out of orders at current production rates of 2.5 per month and 4.2 per month respectively by January, 2018, and with only 13 options for the Q400 and 18 for the CRJ, 2018 looks like the year the Downsview plant gets closed down and everything gets moved to Quebec, another Cartierville Airport deal in the works ? Business jets deliveries are down 25%, and the old Learjets and the 40 year old Challenger 650 (4th variation of Canadair CL-600, which also gave birth to the CRJ line) are down as well, along with the Global G5000/6000’s, NONE of the current products will be around by 2020, except the CSeries (maybe), the new G7000, and possibly still the Challenger 350, but it won’t be a $15 billion a year business, at best $5.5 billion, and I still believe Combardier is coming (China’s COMAC buying Bombardier Aerospace).

OMG, please NO more money for Bombardier’s projects ! Look the company is in deep trouble, just open your eyes and stop listening to the financial “experts” and Bombardier’s BS PR about being “on track” for recovery ? seriously its a disaster and read on to find out why. The recent 7,500 announced layoffs which … Continue reading

SUMMARY: Learjet, the Bombardier business jet brand it bought (a rare Bombardier deal with NO government aid or subsidies) in 1990 for $US 75 million and took on its $US 38 million debt, is soon to be sold as Bombardier struggles with light mid-size jet sales, having only delivered 6 Learjets in the 1st 6 months of 2016. The failure of the Learjet 85 and its subsequent $2.5 billion write down, sealed the fate of Learjet, which has no chance of future sales growth and is losing value year by year with an “old” product line that struggles against the Textron XLS+ and Embraer Legacy 450 in a very “soft” demand environment, where big price discounting is the weapon of choice, especially by Embraer. After 54 years, the sun will set soon on the Learjet brand that Bill Lear started in 1962 using the Swiss P-16 fighter plane as his “inspiration” for the fast Learjet 23, and his LearStar 600 mid-size business jet concept was sold to Canadair in the late 1970’s, which ultimately became the CL-600 Challenger, the grand daddy of the current line of all CRJ regional jets (+1,836 delivered) and the current and 4th version of the 1970’s Challenger (+1,040 delivered), the CL-650 . The buyer may be Textron Aviation, Bombardier’s competitor with its new Latitude, Longitude and eventually Hemisphere lines, as the current 2,300+ Learjets out there (many for sale) still will need continued technical and maintenance support, now worth around $+300 million a year, and could possibly fetch a maximum $375 million price tag, cash that Bombardier desperately needs to reduce its $6.8 billion debt obligations between 2018-2023, so after selling its flight training to CAE in 2015, and its CL-215/415 water bomber rights to Viking Air in June of this year (no price has been published), and now it looks like the Learjet line is next. BUT it will not be the end of Bombardier’s business aviation problems, a tired and old product line (Learjets, CL-650, Global G5000/6000’s) face new products from competitors (Embraer Legacy 500, Falcon 8X, Textron Longitude and Hemisphere, Gulfstream G500/600) all smelling blood at troubled Bombardier.

CHECK OUT August 16, 2016 article on General Aviation delivery summary for 1st half of 2016.   The Learjet product line is about to end anytime soon, as Bombardier looks to sell the brand, which it bought in 1990 for $US 75 million and took on $US 38 million debt, in fact the ONLY aerospace … Continue reading

UPDATE: Transwest Air is now a fully owned subsidiary of WestWind Aviation, now there is only 1 large regional airline in Saskatchewan, and 80% owned by 2 First Nations economic development corporations (EDC’s). These First Nations EDC’s now pretty much own ALL airlines in Canada’s north, usually through Aboriginal economic development corporations (EDC’s), with a few family and corporate hold outs in the Northwest Territories, especially at Yellowknife (Summit Air, Discovery Air-Air Tindi/Great Slave Helicopters, Buffalo Airways) and in Fort Smith Northwestern Air Lease Ltd. Is this a good thing or a bad thing where First Nations own all air services in Canada’s north ? Is this the only viable exit strategy available in the north or are there “pressures” to sell to local First Nations ? and Can the EDC’s create long term financially sustainable airlines ? First Air (Makivik Corp.) and Canadian North (IDA), have tried to merge several times but each time it has failed, even though it makes lots of economic sense to do it, or is more cooperation among the EDC’s needed, like the recent cooperation between Air North and First Air ?

As to my blog of August 21, 2016, the Transwest Air deal is done and it is now a fully owned subsidiary of WestWind Aviation, which itself is owned 55% by the Athabasca Basin Development (ABD) and 25% owned Prince Albert Development Corporation (PADC), in short 80% First Nation owned with 20% owned by the … Continue reading

UPDATE: Canadian regional airline consolidation continues as the once fragmented industry starts to consolidate around a single provincial operator. After 11 months under Canada’s CCAA (+/- Chapter 11 bankruptcy/reorganization), Quebec based regional airline, Pascan Aviation is acquired by 2 senior executives in a management buyout (MBO). Meanwhile Saskatchewan based WestWind Aviation, fresh from its acquisition of Osprey Wings last November, looks to takeover its main local competitor, Saab 340 operator Transwest Air, itself the product of two old local airlines and their pioneers (Athabasca Airways of Floyd Glass and La Ronge Aviation of Pat Campling) coming together in 2000, leaving WestWind Aviation a monopoly in Saskatchewan, much like Manitoba with Perimeter Airlines, Calm Air, Keewatin Air and Bearskin Airlines, all under one ownership. Times are changing for regional airlines in Canada, as the second generation of airline owners retire or sell of the businesses that their fathers and mothers built from scratch, usually with nothing more than a single Cessna 180 aircraft. Sad to see the old names disappear, it is the “circle of life”, but the legacies of our Canadian aviation pioneers will always remain with us.

UPDATE: As I wrote this, I found out that WestWind Aviation (80% First Nation owned) has bought Transwest Air for an undisclosed amount, now only 1 airline exists in Saskatchewan, like it or not.   This is my follow up to the January 5, 2016 article “Consolidation in the Canadian Regional Airline Industry”, as the … Continue reading

SUMMARY: Bombardier 1st Half results are out, and it is not good for Aerospace. With only 318 firm CSeries orders today and up to 95 “questionable”, the program suffers from poor sales but even worst, negative margins due to deals below cost, this cannot continue for very long. Yes, 2016 is a tough year for aircraft orders at Airbus and Boeing, and a “price war” is on ! and any big deal will require +65% off list price, which means every new order brings more loses for Bombardier. Meanwhile, CRJ line has only 66 orders in backlog (9 x CRJ-700, 36 x CRJ-900 and 21 x CRJ-1000) good for 25 months of production at the current 2.7 aircraft per month rate, while the Q400 is down to 48 in backlog (40 + 8 recent orders), good to May, 2018 at the current 2.3 aircraft per month. Big discounting under way on the Q400 and CRJ is evident in financials to boost sales, while Business Aircraft orders are slowing down, and production already 20% below last year will be reduced again soon to balance supply and demand. Nothing very promising at Bombardier Aerospace, the company struggles and the 5 year Transformation to 2020 does not look promising at all, market dynamics are creating havoc for Bombardier, but all of that had to have been anticipated when they decided to enter the BIG league and take on Airbus and Boeing, maybe not such a great idea after all ?

LOTS OF ARTICLES IN AVIATION DOCTOR ON BOMBARDIER, TAKE A LOOK. Bombardier (TSX:BBD.B) has released its 1st Half 2016 financials and its time to analyze what is going on at Bombardier so far this year in regard to its struggling Commercial and Business aircraft business. The first 6 months of this year, has seen Bombardier’s … Continue reading

SUMMARY: The 1st Half 2016 numbers are out for Air Canada and Westjet Airlines, the “duopoly” that controls +85% of the Canadian market, where Canadians still have NO domestic or transborder access to a low cost airline. A brief analysis of the financial performance of the 2 Canadian airlines this year with a introduction to airline economics on how a few key numbers drive operating profit. Seems Air Canada does not make an operating profit from passenger services alone, and why its LCC (low cost carrier) rouge has not really cut costs, with the vast majority of savings being higher density seating, and like other Major airline attempts at an in-house LCC in North America like TED (United), Song (Delta #2), Lite (Continental), Express (Delta #1) the cost cutting has NOT gone deep enough, and hence why ALL the North American in-house LCC “experiments” ultimately failed. Lastly, Air Canada’s decision to buy 45 x CS300’s was a politically coerced deal with legal and legislative changes promised by Quebec and Ottawa, and the recent Air Canada threat to “walk away” from the deal if promised legislation was not forthcoming soon, said it all, Air Canada’s EVP Kevin Howlett said it best, “there are alternatives to the CSeries, there are other manufacturers that make comparable airplanes”, meaning we can take it or leave don’t matter as they do have 61 x B737Max firm orders (33 x Max8’s and 28 x Max9’s) to replace its older A319/320’s and E190’s in due course.

The 1st half 2016 numbers are in for Air Canada and WestJet Airlines, and it’s worth looking at how the 2 airlines that control 85% of the Canadian domestic market, which also has NO low cost airline as of yet (the only OECS) whose citizens have no access to a domestic or transborder LCC (low … Continue reading

SUMMARY: Once infamous Wasaya Airways is out of bankruptcy proceedings after owing $35 million, and now looking to become the 1st commercial operator of the $US +/- 28 million Airbus C295W aircraft to serve the 12 First Nations of Northern Ontario that own 100% of the airline. Under new President and CEO Michael Rodyniuk, the once poorly run airline finally has potentially a ” bright” future ahead. But what does a Northern Ontario First Nations airline need 5 x C295W’s costing $US +/- 140 million ? there are much cheaper options, especially when cargo does not care what aircraft it flies in. Recent addition to Wasaya Airways Board is Stephen Smith, the once high flying airline executive at Air Toronto, WestJet and Air Canada, a much needed boost to the Board that oversaw lots of mismanagement and chaos over the past 10+ years. Why would any regional airline become the first and only commercial buyer of any aircraft ? What about support for a high utilization operation ? what about resale value one day ? what about certification ? the price ? military maintenance program ? especially when you can get good used ATR-72 freighters ? and when will Canada stop operating 40+ year old B737-200’s and HS 748’s ? as for a modern country we operate older aircraft fleets than many third world nations. Lastly, with only 9 x HS 748’s left in Canada and 15 at best in the world, it will be sad to see the old workhorse fade away after 55 years after production began.

In June, Airbus demonstrated its C295W transport plane to Northern Ontario based First Nation owned Wasaya Airways (“it is bright” in oji-cree), which comes just as the airline gets creditors approval for its $C 35 million debt restructuring plan, giving just 10% of unsecured debt value to its long list of creditors. The airline has … Continue reading

PRESENTATION: Finding the elusive sustainable airline business model in the Caribbean, a large graveyard for regional airlines for decades. The region has a great deal of potential, but government taxes (up to 100% of net ticket price) play havoc with passenger demand, poor intra regional connectivity and government protection for state subsidized airlines (LIAT, Caribbean Airlines, Bahamasair, Cayman Airways) limits any real competition. Time for real Open Skies, allowing freedom to serve any route by appropriately licensed carrier, and governments to get out of the airline business, and stop taxing airline tickets to the point where tourist traffic is 1/3 of what it was 10 years ago, the whole idea is to get tourist to the islands and then tax them, rather than tax them to death on airline tickets as they then chose other destinations to travel to, its all backwards. LIAT flies 35% of its routes on money losing “social routes” with ATR-72/42’s, time to get small regionals with 15-19 passenger turboprops to compliment and even replace LIAT services on money losing routes, frees up ATR capacity for money making routes and reduces or eliminates loses on “social routes”. Time for a more intelligent approach on air transport and air connectivity in the region, where tourism is still struggling after 8 years, and it is tourism that drives the economies in the Caribbean.

I attended the Carib Avia’s 1st annual Caribbean Aviation Meetup between June 14-16, 2016 in Roseau the capital city of the beautiful Commonwealth of Dominica, and attached is the 2 hour presentation from the Conference. The Presentation covers airlines that have gone bust, regional aircraft, multi-government owned airlines, airline business models, regional airline valuations to … Continue reading

UPDATE: Delta Air Lines (DAL) deal for 75 x Bombardier CS100’s and 50 options, is reportedly and as expected, been priced at around 75% OFF the list price to $18.6 million per aircraft, making the 75 aircraft deal not worth the reported $5.6 billion, but only $1.4 billion, and by my estimate a loss of $780 million ($10.8 million per aircraft) on the order, a great deal for DAL but not for Bombardier’s bottom line. Yes, DAL’s Chairman Richard Anderson took full advantage of Bombardier’s desperation for a new Tier 1 airline order (majority of current orders until now have been Tier 2 and 3, small regional/national mediocre customers), and drove a home great deal for DAL and its shareholders, while Bombardier gets a prestigious order after 19 months of nothing and another loss making order (285 aircraft so far all heavily discounted), at a time it wants more and more taxpayers money even as Bombardier plans to start a new Iranian airline in Qeshm ? Now the 285 ‘firm’ orders (excluding 45 x CS300 LOI from Air Canada and including the soon to be cancelled order for 40 x CS300’s to Republic Airways now in Chapter 11 bankruptcy), almost fill Bombardier’s planned 255 (min.) to 315 (max.) delivery positions to the end of 2020, basically all money losing orders some going back to 2009. WHEN will Bombardier’s CSeries make money ? No point in being in any business if there is no long term profitable and sustainable business model. They say break-even by 2020 but that does not add up, even after the $3.3 billion write down on the $5.3 billion program last year (surely over $6.3 billion now and climbing) they must using some accounting “magic” tricks, as the program is still in a very poor financial, sales and production shape today. The Federal government has not committed to the $1.0 billion, 1/3 ownership of the program that none of the top 3 aerospace competitors wanted 7 months ago, and EIS (entry into service) is 12 weeks away with no FAA and EASA certification yet ? The prognosis is not good for the CSeries, even though the aircraft is fabulous but the 100-150 seat market is dubious at best and this market segment has already destroyed the A318 (after 81 deliveries) and the B737-600 (after 69 deliveries) with the CRJ-1000 (44 deliveries in 6 years and $243 million write down last year) soon to follow and is the CSeries right behind it ? By 2020 the duopoly is over, as China’s Comac C919 and Russia’s Irkut MC-21 enter the $150+ seat single aisle market, and Bombardier would be the 5th wheel in a highly contested market, where only the strong will survive and that ain’t Bombardier by any stretch of the imagination ! Coupled to decreasing Business Jet orders and the whole dated product line now under attack by new competitive aircraft , as LearJet 70/75 are dying and company has no future after the cancellation of the LearJet 85, “cash cow” Global 5000/6000 are fading as is the 36+ year old Challenger 650/605/504/601/600 line and the new Global G7000 is going to join the CSeries as the only 2 products for the future, each with its own set of major challenges to success.

READ: Blog article on DAL deal, April 28, 2016 Well the Delta Air Lines (DAL) deal for 75 x CS100’s and 50 options is done, and brings the current order book to 325 ‘firm’ orders, though the 40 aircraft order by Republic Airways (USA) from February, 2010 is out, as that airline is in Chapter … Continue reading

SUMMARY: Delta Air Lines (DAL) has ordered 75 x Bombardier CS100’s and optioned another 50, in a surprise and risky move by the airline. A surprise as it was expected to first replace the 116 x MD-88’s that have 149 passenger seats and the aircraft are 25.5 years old with CS300’s (130-160 seats), but the CS100 (108-130 seat) order means it is more intended to replace the 90 x B717-200s (110 seat) which are 14.4 years old. Risky, because this is a program that was for sale in October, 2015 ( 7 months ago) after a 8 year and $5.3 billion investment, and had only 250 firm orders till today (160 “real” orders) after 8 years of sales and marketing, and now that is up to 325 orders (+ 45 for Air Canada still LOI), but still a very small, and nothing to brag about. A $US 500 million “special charge” (very common these days in Bombardier accounting) will show up in Bombardier’s 2Q/2016 financials to cover the losses on 1st quarter 2016 CSeries sales to DAL (75 x CS100’s), Air Canada (45 x CS300’s) and airBaltic (7 x CS300’s), or $US 3.93 million per aircraft, as that will be the LOSS for those 127 aircraft sold and more losses will come from the 250 ‘firm’ orders it has today ! to sell 370 aircraft below cost takes Bombardier to the end of 2021 production capacity, when will it make money ? Bombardier claims the CSeries will break-even by 2020 ! how ? state subsidies for more “special charges” ? The company is still trying to spin off the CSeries program into a separate limited partnership with the governments of Quebec and Canada for $C 2.6 billion of taxpayers money for a 2/3 share of the new company, so that Bombardier can ‘clean’ up its accounting books and spread the risk, but there is no progress yet as the 2 controlling families do not want to give up majority control. The competition said NO to the CSeries but now Canadian taxpayers are being ‘suckered into investing in a program the commercial industries 3 leading manufacturers said NO to ! Then there still is the fact that even with 12 weeks to go to entry into service (EIS) with Swiss, the CS100 has no FAA or EASA Type Certificate ? certification cannot be left for the last minute, any delay in EIS/delivery will not be good for the CSeries as all eyes are on its EIS and production ramp-up this year, and Canadian Type Certification does not automatically mean an easy ride through FAA and EASA Certification, something to keep an eye on for sure. The DAL order is a major WIN for the CSeries order book which has not had a new order since September, 2014 and yet it is surely a LOSS for the financial books, as DAL surely got a “sweetheart deal” from a desperate Bombardier, which probably did not have to compete with either Airbus and Boeing for the smaller CS100 order, and only had to face Embraer’s E195/190-E2 program, but still I am sure +/-50% off the list price of $US 74 million per aircraft was negotiated way down (not a $5.6 billion but more closer to $2.8 billion deal) by DAL Chairman/CEO Richard Anderson, an excellent hard ball negotiator and airline executive, who in July, 2015 cancelled a big $US 4.0 billion aircraft deal for 40 x B737-900’s and 20 x E190’s, when his pilots rejected a tentative agreement ! With now 325 ‘firm’ orders (235 “real” orders), the production of the CSeries to the end of 2010 should be full, as Bombardier said it would have produced between 255 and 315 aircraft by the end of 2020. The problem is that some orders go back to 2009/2010 and surely most if not all current orders are money losing deals, with early big discounts (especially long time Bombardier customer Lufthansa), so when will Bombardier make money on the CSeries ? The answer maybe never ! as the market segment for 100-150 seat aircraft has been in decline for 9 years now (only 53 deliveries in 2015 by 4 OEM’s), from its peak in 1991 with 330 deliveries. The segment killed the A319 (81 deliveries), killed the B737-600 (69 deliveries) and presently killing the Bombardier CRJ-1000 with 46 deliveries after +6 years and a $243 million write down in 2015 due to “low demand”, off course ! Yet Bombardier keeps dreaming and believing in its forecast of 7,000 aircraft in the segment over 20 years (350 a year on average, a rate never yet achieved), they are just blind to the reality of the market. A market segment with low demand and low to negative margins is a recipe for disaster, and with Airbus and Boeing out to kill the CSeries for entering their market segment (130+ seats), pricing will be very low, so even when the CSeries does WIN an order, it will LOSE financially, and it is 100% concentrated in the worst market segment at the worst possible time, as airlines are up-gauging fast, and the Airbus and Boeing 150-240 seat single aisle market (A320/321neo and B737Max8/9) today outsells the 100-150 seat market by a ratio of 67:1 ! (7,223 orders vs 110), says a lot about where the market is and more importantly where the market is not ! Boeing starts on its “new” B737Max7.5 to counter the CS300 and to move out of the 100-150 seat market, a shrunk version of the Max8 with 150 seats in 2 class configuration, the battle is on, by 2020 there will be 5 manufacturers in the single aisle market, not everyone will win.

READ: Blog article on Delta Air Lines and Bombardier CSeries of January 21, 2016 plus many articles on the CSeries in past articles It is official, after months of rumors, Delta Air Lines (DAL) has ordered 75 CS100’s from Bombardier with 50 options, the deal could be valued at $US 5.6 billion ($US 74.6 million … Continue reading